Cartel, International

The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Cartel, International


an agreement (alliance) among monopolies or firms from different countries (but operating primarily in one economic sector) to divide up markets and sources of raw materials, establish monopoly prices, exploit patents, and take other steps to obtain maximum profits. International cartels also include domestic cartels and other forms of domestic monopolistic associations.

The appearance of international cartels is related to capitalism’s transition to the stage of imperialism. This was pointed out by V. I. Lenin: “Under capitalism the home market is inevitably bound up with the foreign market. Capitalism long ago created a world market. As the export of capital increased and as the foreign and colonial connections and ‘spheres of influence’ of the big monopolist associations expanded in all ways, things ‘naturally’ gravitated toward an international agreement among these associations and toward the formation of international cartels” (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 27, p. 364). The international cartel is a new stage in the world concentration of capital and production.

The growth in the number and economic strength of international cartels accelerated especially after World War I, during the general crisis of capitalism. In this period the sphere of influence of capital was growing increasingly narrow and the problem of markets was becoming more acute. Whereas there were about 100 international cartels before World War I, by the start of World War II there were about 1, 200. International cartels helped prepare and unleash World War II.

After the war, with the appearance and development of the world socialist economic system and with the heightened competitive struggle among the Western European capitalists and the capitalists of the United States and Japan, the process of cartelization became more intense. In the 1950’s there were tens of thousands of international cartels. They operate as international (most often secret) agreements among capitalists directed against the working people of their own countries and the peoples of other countries.

With the growth of state-monopoly capitalism international cartels often appear as agreements among particular capitalist countries directed primarily against the world socialistic economic system. Such organizations as the European Coal and Steel Community and the European Atomic Energy Community have become the military-economic base of NATO. Their development is linked with the intensified process of capitalist integration.

The most important international cartels are in maritime shipping, machinery and equipment, fertilizers, chemical products, ferrous and nonferrous metals, and petroleum.

Maritime shipping. The cartels in maritime shipping exist primarily in the form of conferences and pools. A conference is an agreement among shipowners on general conditions for shipping, distribution of work by region, and prices for maritime shipments. The pool is a higher form of the cartel. In the pool the participants agree on how to distribute cargoes and passengers, incomes, and so on.

The maritime shipping cartels have various names. Usually the names indicate the service region (for example, the United Kingdom-Australia Conference, the Association of West India Transatlantic Steamship Lines).

Most of the maritime shipping cartels operate on international waterways. One shipping company may be a member of several international cartels that operate in different areas.

Maritime shipping cartels appeared in the last quarter of the 19th century. The first cartel agreement in route shipping was the Calcutta Conference, which was formed in 1875 for shipping cargo between India and Great Britain. Between the two world wars, separate cartels covering different shipping regions concluded agreements for the first time. Before the world economic crisis of 1929–33 the international maritime shipping cartels controlled more than 50 percent of the passenger traffic and about 80 percent of cargo shipping.

After World War II the number of cartel agreements on routeshipping increased. In 1972 there were about 370 agreementscovering a large majority of the shipping routes between theports of the capitalist countries. The power of the shipowningcartels grew substantially, and the practice of concluding agree-ments among separate cartels in route shipping expanded. Withthe development of container vessels in the late 1960’s and early1970’s, consortiums appeared whose purpose was to monopolizethis shipping. By monopolizing shipping on certain routes andestablishing increased rates for cargo and passenger shipping, themaritime shipping cartels receive high profits. Shipping rates arerising steadily. The cartel agreements are unable to eliminatecompetition in capitalist maritime shipping. It exists amongshipowning companies that belong to the cartels, among in-dividual cartels, and between cartels and outsiders. The policiesof the maritime shipping cartels and the high prices they set forshipping have a negative effect on the development of interna-tional trade and particularly on the trade of the developingcountries


Machinery and equipment. Cartels in machinery and equipment are typically found in electrical engineering and in transportation machine building, that is, the sectors with a high level of production concentration.

The largest cartel is the electrical equipment cartel. It was formed in 1930, closed down in 1942, and was restored in 1945. By the early 1970’s it included 40 companies: 17 in Great Britain, five in Switzerland, four apiece in France, Italy, and the Federal Republic of Germany (FRG), three in Sweden, and one apiece in Belgium, Austria, and Finland. There are 16 trade sections for particular types of equipment (for example, generators and electrical engines, hydroturbines, steam turbines, and transformers). The activity of the cartel is based on agreements concerning prices, compensations, and notification (all members of the cartel inform each other of requests for information, orders received, and so on); these agreements enable them to sell equipment at high monopoly prices. The British companies have the strongest position in the cartel. US companies do not participate in the cartel formally, but in fact they exercise great influence because the largest American electrical engineering monopolies are closely linked with the West German and French members of the cartel.

The radio-equipment cartel was formed in 1925 and reestablished after World War II. It includes a number of companies from the USA, the FRG, Great Britain, France, and other countries, including General Electric, Westinghouse, Siemens, AEG-Telefunken, and General Electric-English Electric. In the postwar period major changes have taken place in the radio and electronics industry; many new types of products have appeared, above all electronic computers. American monopolies have captured a dominant position in the computer market.

In 1969 a cartel agreement was concluded between two large motor vehicle monopolies, the American-owned Chrysler Corporation and the Japanese company Mitsubishi Heavy Industries. The agreement envisions cooperation in the production and assembly of motor vehicles and in technical, trade, and financial matters (in the USA, Japan, and third countries). In 1968 an agreement with similar cartel features was concluded between two other motor vehicle monopolies, Italian-owned Fiat and the French company Citroën.

International cartels in machinery often take the form of inter-national associations, federations, bureaus, or committees. Theassociations unite large numbers of companies. An example isthe International Association of Rolling Stock Builders, whichincludes more than 80 railroad-car companies in Western Euro-pean countries and controls the railroad car market in WesternEurope. Large West German, British, French, Belgian, and Ital-ian companies are the leaders of the association. A similar rolein the Western European market for diesel locomotives is playedby the European Builders of Internal Combustion Engine andElectric Locomotives.


Fertilizers. Before World War II the international fertilizer market was dominated by the international potash cartel (formed in 1926), the nitrogen cartel (1928), and the phosphate cartel (1933). The fertilizer exporters were included in these cartels. After the war the American monopolies gained a much stronger position and began to force West German, French, and Italian monopolies out of the principal markets. In 1962 a new international nitrogen cartel was formed in Zurich (Switzerland). It includes nitrogen fertilizer producers from the continental countries of Western Europe only. The cartel’s coordinating center is the joint-stock company Nitrex AG; it has a share capital of 1 million Swiss francs, which is divided equally among members of the cartel. As in the prewar cartel, West German monopolies have 30 percent of the shares. When the cartel was formed, its members handled 83.5 percent of nitrogen production in Western Europe and 35 percent of all production in the capitalist countries. Nitrex collects all orders for deliveries of nitrogen fertilizer and distributes them among members of the cartel.

The international potash cartel, which operated until World War II, included monopolies in France, Germany, Spain, Poland, Great Britain, the USA, and other countries; since the war its functions have been performed by the International Potash Institute in Bern (Switzerland), which represents primarily the interests of the Western European countries, and by two American organizations, the Potash Institute of North America and the Foundation for International Potash Research.

The international cartel for phosphates, which until WorldWar II included phosphate exporters in the USA, North Africa, Germany, the Netherlands, and other countries, has been brokenup into a number of regional cartels. They coordinate their ac-tivity at the world-market level. As under the conditions of theprewar agreement, 50 percent of the phosphates exported fromthe United States are shipped to the Western European coun-tries, 20 percent go to Japan, and 30 percent to Canada and theLatin American countries; about 90 percent of the export ofphosphates from North African countries is directed to WesternEurope, with none of the exporters delivering phosphates to theUSA.


Chemical products. Cartels in chemical products appeared at the end of the 19th century and spread especially widely between World War I and World War II.

The soda cartel appeared in 1872. Its activity before World War II was regulated by agreements concluded in 1924, 1929, and 1938. The members of the cartel were the Belgian Solvay monopoly, the American national soda export cartel Alkasso, the English chemical trust Imperial Chemical Industries (ICI), and the German chemical trust I. G. Farbenindustrie. The cartel regulated the export of soda products to the entire capitalist world. The domestic markets of the cartel members were their exclusive territories.

The cartel for aniline dyes (1927) controlled more than 90 percent of all production of organic synthetic dyes in the capitalist world. The I. G. Farbenindustrie trust played the leading part in this cartel, which also included companies in France, Switzerland, Italy, Great Britain, Poland, the USA, and Japan.

The intensified competition in markets for chemical products after World War II impelled the largest monopolies to restore prewar cartels or establish new ones. In particular, cartel agreements for soda products, dyes, and quinine have been reestablished.

In the postwar period the cartel regulation of markets for a number of chemical products has been carried on under the banner of various international associations, scientific research centers, standards bureaus, and business alliances (such as the International Group of National Pesticide Manufacturers’ Associations, the European Committee of Paint, Printing Ink, and Artists’ Colors Manufacturers Associations, and the International Rayon and Synthetic Fibers Committee). Patent and license agreements, especially for new types of chemicals, are increasingly being used to regulate markets and production.


Nonferrous metals. The best-known nonferrous metals cartels are the aluminum and copper cartels. Before the start of World War I two international cartels functioned in the aluminum market, the first in 1901–08 and the second in 1913–14. After the war the principal aluminum monopolies concluded a new agreement on prices (1923), and in 1926 they formed the third international cartel, whose activity was disrupted by the world economic crisis of 1929–33. The fourth international aluminum cartel, the most powerful one, was formed in 1931 as a joint-stock company under the name Alliance Aluminum Company, with a 99-year period of operation. The cartel was formed by the largest aluminum companies in Great Britain, Germany, Canada, France, and Switzerland. Stock was distributed among the members in proportion to their production capacity. A share of stock gave the right to produce a certain amount of aluminum. The start of World War II disrupted the operation of the cartel, but it was not formally disbanded until after the war. By the early 1960’s the world capitalist aluminum market faced a real threat of oversupply for an extended period. Under these conditions the aluminum monopolies returned again to the idea of coordinated influence on the market, which is seen in particular by their uniform price policy.

The international copper cartel, Copper Exporters Incorporated (1926), controlled 86 percent of copper production in the capitalist countries and virtually directed the London metals exchange. The cartel included leading American and Western European copper monopolies, including American Metal Climax Incorporated and the American Smelting and Refining Company. The cartel broke up during the economic crisis of 1929-33. In 1935 a new copper cartel was formed for three years; it controlled about 75 percent of the production in the capitalist countries. The cartel included the largest copper companies, which were run by American, English, and Belgian capital. During the crisis of 1957-58, the reduction in copper consumption and sharply increased production led to the accumulation of a substantial surplus and a drop in prices. For this reason the leading companies agreed on a simultaneous and uniform reduction in copper production. Later (1962-63) they achieved even greater control over copper prices than had been the case with the 1926 cartel. The growth in demand for copper led to the breakup of this agreement in 1966.


Ferrous metals. The international steel cartel, which operated before World War II, was formed in 1937 on the basis of a 1933 agreement dividing up markets among Germany, France, the Saar, Belgium, and Luxembourg. Czechoslovakia and Austria joined the agreement in 1934, Hungary, Poland, and the British steel federation in 1935, and the US steel monopolies in 1937. The cartel controlled virtually the entire capitalist steel market. In 1938 about 85 percent of steel production in the capitalist countries came from countries whose companies were members of the cartel. Cartels dealing in ferrous-metal products were closely allied to the steel cartel, although they existed independently of it. After World War II attempts were made to reestablish the steel cartel. In 1953 the metallurgical monopolies of France, Belgium, and Luxembourg signed an agreement, which came to be known as the Brussels convention, to organize a steel cartel. West German and Dutch companies joined the organization in the same year, and Italy and Austria subsequently joined.

The worsening situation in the ferrous metals market led to the formation of the International Iron and Steel Institute (IISI), a cartel-type organization, in 1967. Unlike the prewar cartel it does not divide up foreign markets. The IISI was officially formed to strengthen contacts among steel-industry people of various capitalist countries and to further the exchange of information concerning the ferrous metals market. In 1970 the IISI included more than 100 metallurgical companies in 24 capitalist countries, producing about 95 percent of the steel in the capitalist world. The number of votes for each country depended on its volume of steel production. Therefore the institute’s work is actually controlled by the USA.

In addition to the general cartels there are cartels for particular types of rolled products. Companies in Germany, France, Belgium, Czechoslovakia, Luxembourg, the Saar, Poland, the USA, Great Britain, and Canada were members of the pipe cartel formed in the mid-1920’s; they were later joined by Japanese and Italian producers and Swedish importers. In 1935 the pipe cartel broke up. In 1950 a few of the members of the pipe cartel concluded a gentlemen’s agreement. The members of this group are French, West German, Belgian, Dutch, and Italian industrialists. In addition to the pipe cartel, the rail cartel has continued to function in the postwar years. Because rail production in the capitalist countries is concentrated in a relatively small number of companies, the companies have been able to control the market. Before World War II tin producers concluded several agreements to divide up the market, with British and US monopolies dominating the market. In the postwar period a new cartel has been in operation; this is the tin “club,” which includes producers in Great Britain, the FRG, France, Italy, Belgium, Luxembourg, the Netherlands, Canada, and Japan. The cartel establishes control over the market by concluding agreements that limit mutual trade and provide for division of the markets of the nonmember countries. The cartel has been able to involve American companies unofficially in its activity.


Petroleum. The petroleum cartel includes seven major oil trusts in the United States, Great Britain, and the Netherlands. These are Standard Oil Company of New Jersey, Standard Oil Company of California, Mobil Oil, Gulf Oil, and Texaco in the United States, British Petroleum in Great Britain, and Royal Dutch-Shell in Great Britain and the Netherlands. In a number of situations these companies cooperate closely with the French monopoly Compagnie Française des Pétroles. The cartel was formed in the late 1920’s and early 1930’s and spread to all the capitalist countries and all sectors of the petroleum industry, from the exploration for and extraction of petroleum to the production and marketing of petroleum products.

The US oil monopolies that belong to the cartel are the property of private American capital. Private capital in Great Britain and the Netherlands controls Royal Dutch-Shell. With British Petroleum, 49 percent of the shares issued belong to the state. In Compagnie Française des Pétroles, 35 percent of the shares in terms of value and 40 percent in terms of voting rights belong to the state. Therefore, the oil cartel represents an alliance of private and state-owned monopoly capital, one that follows a particularly aggressive policy in relation to the developing countries that own the oil. This policy is executed with the direct support of those countries’ governments.

The intensified competitive struggle between cartel members and outside monopolies after World War II, the trend toward state monopolies in the industrially developed countries, which are the principal users of oil and petroleum products, and the strengthening of the anti-imperialist movement in the petroleum-producing developing countries and nationalization of the property of cartel members in some of them have led to a reduction in the cartel’s share in petroleum. Between 1963 and 1969 the cartel’s share of petroleum extraction (outside US borders) dropped from 82.1 percent to 76.8 percent, its share of petroleum refining dropped from 65.3 percent to 56.1 percent, and its share in the marketing of petroleum products went from 62.6 percent to 54.1 percent.


The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.